Nearly a third of all U.S. homes are being bought with all cash — and even though that trend has dipped slightly from earlier this year, it’s still up from before the COVID-19 pandemic sent the housing market into a frenzy.
That’s according to a Redfin report published Friday, which found 31.4% of U.S. home purchases were paid for with all cash in July. That’s still pretty close to an eight-year peak reached earlier this year, in February, at just over 32%, and up from 27.5% a year earlier.
“The share of all-cash purchases jumped in early 2021 during the pandemic-driven homebuying frenzy and has remained elevated since then,” the report states.
Redfin analyzed county records across 41 of the U.S.’s most populated metro areas, dating back to 2011, with July being the most recent month with available data.
Why are there so many cash buyers?
Mortgage rates jumped above 6% this week for the first time since 2008. Now is not an ideal time to seek financing for a home purchase — so any buyer would likely prefer to pay cash if they’re able.
However, cash buyers also flooded the market (along with everyone else) at increasing rates during the pandemic housing frenzy, when mortgage rates were below 3%.
But this was also a time when competition in the homebuying arena was at an all-time high. Buyers faced bidding wars and struggled to make themselves stand out among sometimes dozens of other offers. All-cash offers were another way buyers set themselves apart.
It also comes down to a key part of why the housing market burned so hot during the pandemic. The sudden lurch to remote work allowed Americans to reevaluate their lives, sell, and use cash to buy homes in new areas.
“It allowed a record share of homebuyers to relocate,” Redfin notes, “often from expensive to affordable parts of the country. U.S. home values have skyrocketed since the start of the pandemic, which means Americans who sell a home in a pricey place like San Francisco may use equity to pay cash in a more affordable area like Las Vegas.”
Investors are also contributing to the rise in cash buyers. Of U.S. homes sold in the first quarter of 2022, 28% were purchased by investors, according to a recent report by Harvard University’s Joint Center for Housing Studies. The report also found investors have been snatching up a “record share” of single-family homes — with a spike in investor purchasing that began soon after COVID-19 hit the U.S.
Still, investors are continuing to buy more homes than they were before the pandemic. In the second quarter of this year, they purchased 87,500 U.S. homes, up 5.9% year over year, according to an August Redfin report.
Where are cash buyers most common?
Think about the type of people who are most likely to buy a home with all cash: the ultra wealthy. Now think where they’re most likely to live.
Long Island, New York — home of the Hamptons — is in Nassau County, the metro with the highest share of all cash buyers in July: 66.5%, according to Redfin.
The next two highest ranking metros are both in Florida: West Palm Beach (56.4%) and Jacksonville (45.5%).
Here’s a ranking of Redfin’s top 10 most cash buyer rich housing markets.
- Nassau County, New York — 66.5%
- West Palm Beach, Florida — 56.4%
- Jacksonville, Florida — 45.5%
- Milwaukee, Wisconsin — 45.3%
- Fort Lauderdale, Florida — 43.3%
- Orlando, Florida — 42.5%
- Atlanta, Georgia — 42.4%
- Cleveland, Ohio — 42.1%
- Charlotte, North Carolina — 42.1%
- Tampa, Florida — 41.3%
Where are cash buyers least common?
Now look to the West. Three expensive markets in California and Washington rank with the lowest share of all-cash buyers, according to Redfin’s report, “partly because high prices make it more challenging to pay in cash.”
Here’s a ranking of the metros with the smallest share of all-cash buyers in July.
- Oakland, California — 15.1%
- San Jose, California — 16%
- Seattle, Washington— 16.7%
- Washington, D.C. — 17.5%
- Pittsburgh, Pennsylvania — 17.8%
- Virginia Beach, Virginia — 18%
- Los Angeles, California — 19.6%
- Newark, New Jersey — 19.9%
- San Diego, California — 20.1%
- Portland, Oregon — 20.4%